When a devastating earthquake struck Haiti in January, phones enabled Haitians to withdraw cash at local banks or access account funds to pay for groceries.
Few Haitians had access to bank services before the earthquake, and people's access to the funds from government and relief organizations helped to rebuild the economy.
The spawning of a "mobile money" market in Haiti illustrates how mobile funds-transfer applications could develop elsewhere. Now card companies and mobile carriers in various parts of the world are coming together to meld the popularity of cell phones with access to financial services.
Users of mobile phones far outnumber people who have access to financial services. Globally 5 billion people have phones, but only 1.5 billion have access to financial services, according to Obopay Inc.
Companies such as Visa Inc., MasterCard Inc. and Obopay each have launched mobile-money initiatives to mesh the two markets. These include Visa programs in India and Peru, MasterCard's work in Brazil and the U.K., and Obopay's programs in the United States and Africa.
The mobile-money movement began in the Philippines and Kenya and has spread to surrounding areas in small pockets, said Red Gillen, senior analyst at Celent. But it is evolving differently in developed countries, he said.
"The simple, common denominator is that consumers in developing markets don't have a financial infrastructure, but the mobile-phone saturation rates are pretty high," Gillen said.
At first consumers in those areas exchanged mobile-phone minutes as a form of currency, which prompted companies such as Obopay to develop mobile-money services.
Yet in developed markets, where financial services generally are available, it has been harder to persuade consumers to use their phones to move money, Gillen said.
"It's a very different approach," he said. "People have payment cards in their wallet, and the system works really well. So mobile money has to be presented as something better than cards."
In most regions, mobile-money initiatives start almost as grassroots efforts. That was the case in Haiti, which is considered a developing market.
The global relief organization Mercy Corps of Portland, Ore., and Voila, a Haitian subsidiary of Trilogy International Partners in Bellevue, Wash., completed their mobile money funds-transfer pilot, which included about 400 Haitians in the Central Plateau area of the country, this year.
The organizations gave Haitians subsidized mobile phones to receive payments via an SMS text code for cleanup work that Mercy Corps organized, said Lisa Hoashi, the organization's spokeswoman in Haiti.
One goal was to use mobile technology to improve the victims' situation by helping create a financial infrastructure for Haitians displaced by the earthquake, Hoashi said. "In Haiti, 85% of the people have mobile phones, and hardly any have bank accounts," she said.
Visa and MasterCard are working in developed and developing markets to roll out mobile-money initiatives.
MasterCard defines the developed and developing markets as carded and uncarded, according to James Anderson, the company's vice president of mobile market development. In developing regions the goal is to prove mobile money is better than cash and in developed regions to prove it is better than cards, he said.
"The basic concept is that there are lots of developed markets where over the last 40 years cards have been the preferred way to transact," Anderson said. "For those markets, including the U.S. and Europe, we have to make sure that as consumers transition to mobile that we take the service they are familiar with and bring that to the mobile device."
For developing markets with relatively few cards and where cash use is dominant, MasterCard wants to deliver its card-network strengths and assets to the consumers using mobile-payment devices for the first time.
To bring its mobile-payments services to developing regions, MasterCard in June announced a joint venture with Smart Hub Inc., a subsidiary of Smart Communications, one of the largest mobile operators in the Philippines, to link Smart Hub's mobile-payments platform to MasterCard.
The deal builds upon the MasterCard Mobile Payments Gateway, an open mobile-payment processing platform the card brand plans to launch in Brazil by the end of the year with the financial institutions Itau Unibanco and Redecard and the mobile-network operator Vivo.
With MasterCard's gateway, which opened in late 2009, issuers, acquirers, merchants and mobile-network operators can access the MasterCard payments network for mobile transactions. Consumers who have card accounts may link existing cards to the network for transactions. MasterCard provides a mobile-payment account to fund transactions for unbanked consumers.
MasterCard will use its back-end card-processing system to support the mobile transactions, though it could not provide further details on the project.
Visa also has been busy in the mobile-money market in both developed and developing markets.
In the developing market, Visa has partnered in India with Bharti Airtel, ICICI Bank, HDFC Bank, Standard Chartered Bank and payment-platform provider mChek to launch mobile prepaid top-ups, bill payments and other transactions, such as transit ticketing.
In Peru, Visa and Visanet Peru have teamed with Telefonica Movistar to launch Visa Pago Movil, which enables Visa debit and credit cardholders to make mobile payments for products and services, such as mobile air time, taxi rides and food and flower delivery.
The Visa programs enable the banks that hold the funds to access and process transactions through the San Francisco company's VisaNet network.
"The network we utilize for the mobile transactions is the existing network," said Ginger Baker, senior business leader for emerging markets innovation at Visa. Once the transaction goes through the mobile network, banks still communicate through the existing back-end payments infrastructure, she said.
"That's what is so wonderful about this opportunity — you have two existing, well-positioned networks. When you couple the banking network with the mobile-telecom system, you get the reach of the market," Baker said.
In the developed market, Visa announced a collaboration with DeviceFidelity Inc., which uses its technology to transform a mobile phone with a microSD memory slot into a contactless payment device, this year. U.S. Bancorp, Bank of America Corp. and Wells Fargo & Co. are testing the contactless mobile-payment technology, Visa said.
The major card brands have been testing the waters of mobile payments in recent years, but Obopay was one of the first companies to launch a mobile-money product for consumers in the United States.
Carol Realini, Obopay's founder and chief executive, was struck by how individuals in Africa used cellphone minutes as a currency and would walk for miles to phone stores to purchase them.
"Mobile-phone minutes were almost a more stable currency than money," David Schwartz, the Redwood City, Calif., company's head of product and corporate marketing, said.
In Kenya only 24% of the population had access to bank accounts four years ago, Schwartz said. But since mobile-money programs, including Obopay, have launched there, the share has grown to 35%.
When Obopay brought the mobile-money concept back to the U.S., it found stark differences.
"In the U.S., we found that having mobile money is about adding convenience to people's lives," said Schwartz, who noted that younger people are more likely to adopt the technology.
Obopay's own research suggests that 12-year-olds are the segment most apt to accept and adopt mobile payments, Schwartz said. Obopay's best results in the U.S. have come from allowing parents to send their kids funds by cell phone, he said.
Many U.S. merchants that sell goods and services do not take cards for payments, and that is another of Obopay's target audiences, Schwartz said.
Of the 30 million merchants that sell goods and services, such as housekeeping, day care and plumbing, 24 million are cash-only, according to Obopay.
"We've found that these businesses are the early adopters," Schwartz said.
Celent says that, in developed regions of the world, mobile-money efforts should focus on bundling services to tie in with the existing card-based payments environment.
The key for developed markets, the market research firm says, is to build on the established reliance on credit and debit card systems for payments.
